CITY AA/Patrol 2...Automobile Association (AA) patrolman Tom Standeven at work in Bristol today (5th July 1999) Centrica, owner of British Gas, is to buy the Automobile Association for 1.1 billion, triggering 240 windfalls for AA members, It pledged to maintain and invest in the AA s standards of roadside recovery and preserve its role as a campaigner for motorists. The two groups said the deal would create savings of at least 85 million a year.
A spike in call-outs pushed up costs for the AA and dented profits © PA

A rise in call-outs because of bad weather and a “pothole epidemic” across Britain caused profits at the AA to sink by 64 per cent for the six months between January and July.

Pre-tax profits at the breakdown company fell from £64m to £23m for the half year, with revenues up slightly at £480m from £471m. 

Shares in the AA fell as much as 9 per cent on Wednesday morning.

Trading ebitda, the company’s preferred measure of profit that strips out exceptional operating costs, also fell 17 per cent to £161m. The group said it was still on track to meet previous guidance of £335m to £345m for the full year. 

In February the company cut its guidance for the year, because of the need to increase spending in its attempts to transform the business

During the six months the company, which has £2.7bn of debt, also extended the date of its first repayment to January 2022 from 2020, and had its credit rating reaffirmed by S&P.

The business, which was floated in 2014 by its private equity owners, wants to become a technology services provider, with smart boxes that predict breakdowns before they happen and a larger insurance arm.

Spending on these projects hit profits in the first half, while the company also saw call-outs during the colder months hit a 15-year high, pushing up costs. The group has been hiring more patrol units to reduce its reliance on third-party garages for some call-outs.

Chief executive Simon Breakwell said: “The first half of the year has seen exceptional weather conditions, from extreme cold and snow in February and March to the hottest summer in recent memory, with the severe winter also creating a pothole ‘epidemic’ on the UK’s roads.

“All this led to a 15-year high in the number of breakdowns we serviced. Against this backdrop, I am extremely proud of our achievements and to be reporting results in line with our guidance as we continue to build resilience throughout the business.”

Though membership fell 2 per cent to 3.3m, income per member rose by 2 per cent to £159.

The company is trying to move members towards its app, which reduces the volume of calls into its call centre. More than 1m members are signed up to the service, with the app used in around a third of call-outs.

On Wednesday, the group also appointed its first ever chief innovation officer, poaching James Frost from mobile payments group Worldpay to aid its transformation.

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